Drax Group, the owner of Britain's most carbon-intensive power station, is turning green with a £2bn plan to build the country's first large-scale biomass plants which burn plant-based materials.

The three facilities in Hull, Immingham and probably the North Yorkshire village of Drax itself, will have the capacity to produce 900 megawatts of electricity - enough to supply 3% of the country's total needs - but environmental groups warned that Drax must ensure the crop fuel is sustainable.

The company, which runs a massive coal-fired power station at Drax, has told shareholders that some of the cash it was going to pay back by way of dividends will now be switched into building biomass. But it said this would reap long-term rewards.

"This is an exciting opportunity for Drax to develop its business and to deliver shareholder value by exploiting our core competencies, whilst achieving fuel diversification and carbon abatement," said Dorothy Thompson, Drax's chief executive.

"We are strongly of the view that investment in the generation sector will provide attractive returns. We believe our venture into dedicated biomass-fired generation underpins our commitment to reducing the carbon footprint of electricity generation."

Drax will build, own and operate the three plants in co-operation with Siemens of Germany through a 60/40 joint venture. Drax will manage and operate the plants, which should be running by 2014, while Siemens will provide the turbine technology.

The British power group has already secured rights to port sites at Immingham and Hull and is looking at the possibility of constructing a third facility near the coal-fired station which has itself been experimenting with burning plant-based materials such as old timber and straw alongside its base load of coal.

So far, the biomass sector is in its infancy, with only a very small number of larger plants planned and a handful of very small ones in operation.

The port sites suggest that the bulk of the wood and other materials that will be used in the biomass plants will be imported. Drax declined to say how much of the fuel would be imported but admitted it would take time to build up local supplies.

Doug Parr, chief scientist at Greenpeace, said biomass plants could help in the fight against climate change, but only if they make the most of the waste heat they produce and use fuel from carefully chosen sources. "Otherwise they're cutting down trees, shipping them across the world and then throwing away the energy they get from them. Drax already owns the single most polluting power station in Britain, and if they fail to get the technology right on these power plants they could be making their carbon footprint bigger."

The company said its full-year earnings before interest, tax, depreciation and amortisation would be "modestly higher" than the current market consensus, and trading conditions in commodity markets in which it operates have improved.

Drax disappointed some in the City by saying it would distribute all excess cash through dividends until 2010 when it would switch to paying out half of all underlying earnings.

Drax said it had the support of its main shareholders for its moves to go green.